Longform

MEDICAL MALPRACTICE

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By law, the general fund must be balanced every year and cannot run a deficit. The enterprise funds, however, can carry debt from one year to the next under certain, very specific circumstances.

Beginning in 1991, records show, the county began taking advantage of that limited flexibility to engage in what would become a pattern of piling up debt that was not easily discernible to taxpayers.

First, the supervisors began slashing the amount of general fund money that it gave to the health-care agencies to provide care for Maricopa County's citizens. Between 1990 and 1993, the amount of tax money given to the Health Care Agency to run the county hospital was cut from just over $40 million to just over $27 million, freeing up money to pay other bills but driving the hospital into debt.

During the same time period, the county's leaders moved more than $32 million of debt onto the hospital's books, budget documents show.

For the most part, the debt shuffle involved millions of dollars that the county pays each year to private hospitals that provide care to the indigent. The county has a legal responsibility to pay for such care.

Until 1990, the county would pay these outside hospital costs from its general fund. But beginning in 1991, records show, the charges were put on the county hospital's books. Again, the move freed up more cash in the general fund that the county could use to pay other bills, but saddled the Health Care Agency with debt.

Finally, the county skimmed off at least $9 million in federal tax money that was designated for health care, instead putting it in the general fund to pay other bills.

That money came from a federal program that is supposed to help out hospitals that have an unusually high number of patients who cannot pay their own bills. In fiscal year 1992-93, county budget records show, the county actually made $9.1 million from the program, but did not post the money on the hospital's books.

As a result of the various budget machinations, the financial condition of the county hospital budget has plummeted.

The hospital enterprise fund had started the fiscal year in the summer of 1990 with a $23 million surplus. By the summer of 1993, the hospital was more than $30 million in debt, and that figure has now grown to about $40 million.

If the county had simply continued doing business the way it had done before, the county hospital would now be $24 million in the black, according to estimates prepared by Jim Medis, now director of finances for the Health Care Agency.

The county's audited financial statements show that the hospital actually made money from its operations in 1993, and would have stayed in the black if it had not been saddled with debt not of its own making.

What the county did, according to Jim Hogan, chief deputy of the County Treasurer's Office, was bleed the health-care funds dry to pay other bills.

"There appears to have been a little manipulation so they could ride that puppy," Hogan says.

The bookkeeping changes, in and of themselves, were not necessarily suspect, Hogan says.

There are valid accounting reasons that certain costs--particularly the cost of paying private hospitals for care--might be placed on the Health Care Agency's books.

But the end result of the county's machinations, Hogan and others say, was to obscure real financial problems at the county.

"If the county had been cruising along with a surplus and decided to make some of these accounting changes, nobody would have noticed," he says. "But it was out of convenience that these changes were made to increase the health-care deficit and mask the general fund deficits.

"It is not coincidental that some of these accounting techniques were employed when they were."
@rule:
@body:Although the Health Care Agency was used to shift debt off the county's general fund books, the agency is not blameless for the dire financial condition of county health services.

Even agency head Williams acknowledges that the county's health-care system has problems of its own making. In the past year, Williams says, he has found more than $22 million in cuts that could be made to the agency's budget without affecting the quality or quantity of health care provided.

The agency has a bad track record when it comes to collecting money it is owed. At the end of the past fiscal year, the hospital alone had more than $50 million in bills that had not been paid.

The agency also garnered a host of bad publicity last year when it scrapped a brand-new, $12 million computer system because it supposedly did not have enough money to finish the installation. That system was expected to speed billing practices, and therefore bring additional revenue into the Health Care Agency.

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David Pasztor